The healthcare sector can be the perfect area of the market to look if you are a buy and hold investor since there are so many different ways that these businesses can grow over the next decade. It’s also a great sector to pursue during the current market volatility, as a lot of these companies are considered to be defensive and should see steady demand for their products regardless of what’s happening in the economy.
With healthcare spending in the United States expected to account for roughly 20% of GDP by the year 2028, it's safe to say that there are going to be plenty of opportunities for companies in this sector to deliver strong returns in the coming years. Investors can also rest easy knowing that they own a part of businesses in a growing industry that is in the spotlight following the pandemic.
That’s why we’ve put together the following list of the top 3 healthcare stocks to buy and hold in October. Let’s take a deeper look at why these stocks stand out.
1. Merck & Co
The first stock on our list is a pharmaceutical company that just delivered some fantastic news related to the fight against COVID-19. Merck & Company (NYSE:MRK) and its partner Ridgeback Biotherapeutics announced that its oral antiviral medicine molnupiravir can significantly reduce the risk of hospitalization or death for people sick with COVID-19. This is huge news, as it could become the first pill shown to treat the virus, ease the pressure that has been put on hospitals, and allow more people to receive treatment around the world since pills are easier to distribute and administer than vaccines.
The company is going to seek FDA approval as soon as possible and could have a huge new revenue stream on its hands should the drug receive the green light. With that said, Merck has plenty of other strong prescription drugs and vaccines that make it an excellent buy and hold stock. Some of the company’s top-selling products include cancer drug Keytruda, type 2 diabetes drug Januvia/Janumet, and the HPV vaccine Gardasil. Merck also recently agreed to acquire a biotech firm called Acceleron for $11.5 billion that should dramatically improve the company’s pipeline and expand its opportunities in the cardiovascular disease market. Finally, a 3.19% dividend yield makes Merck an ideal healthcare stock for long-term investors to consider.
2. Intuitive Surgical
When it comes to buy and hold investing, sometimes looking at disruptive companies with strong long-term growth opportunities can pay off in a big way. That’s why Intuitive Surgical (NASDAQ:ISRG) makes the list, as the company’s da Vinci Surgical system is changing the way that minimally invasive surgeries are performed and could become the gold standard for these types of procedures in hospitals around the world. The system combines advanced robotics and computerized visualization technology to help physicians and hospitals improve the outcomes for their patients, and it's estimated that in 2020 the da Vinci system was used to complete an estimated 1,243,000 surgeries.
Intuitive Surgical stock recently underwent a 3-for-1 split, making it more accessible to new investors, and the company’s business model is attractive given how expensive it is for hospitals to switch to different products after a da Vinci system has been installed. Keep in mind that elective procedures should be on the uptick in the coming months following the pandemic and that hospitals are getting more comfortable with spending again, both factors that could result in strong earnings for this company in the near term. The bottom line here is that this is a healthcare company with a revolutionary product that is improving the way surgeries are performed, making it a strong buy-and-hold candidate to keep in mind.
3. United Healthcare
Last, but certainly not least, UnitedHealth Group (NYSE:UNH) makes our list as it’s the largest managed health care firm in the United States. It’s a quality name in healthcare that offers an intriguing buy point at this time, as the stock recently tested the 200-day moving average with buyers stepping in. United Healthcare provides products and services like traditional risk-based insurance plans, pharmacy benefit management, and health care delivery and optimization, which means investors can count on this company to generate consistent earnings and to play a big role in the evolution of our healthcare system over the years.
In Q2, the company reported a very impressive revenue jump of 15% year-over-year to $73.1 billion and was confident enough to increase its full-year net earnings outlook. The stock also offers investors a decent dividend yield of 1.47% and according to Marketbeat’s dividend history, United Healthcare has delivered 3-year dividend growth of 68%. You won’t find many buy and hold stocks that are more attractive than this one, and the fact that it has pulled back so much over the last month makes it all the more attractive.